RAA Income Approach & Valuation Methods Flashcards
6 cards from real RAA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 RAA Income Approach & Valuation Methods flashcards as text
Which income approach method is most commonly applied to single-family residential properties by RAA appraisers?
Answer: Direct Capitalization using GRM
Direct capitalization using the Gross Rent Multiplier is the most practical income method for single-family homes.
What is 'economic rent' in the context of residential appraisal?
Answer: The rent a property would command in the open market
Economic rent (market rent) is the rent a willing tenant would pay a willing landlord in the open market under typical conditions.
When contract rent differs significantly from market rent, the RAA appraiser should:
Answer: Note the difference and use market rent for the income approach valuation
Appraisers use market rent for the income approach to reflect value to a typical investor, while disclosing the contract rent discrepancy.
In a rent survey, the appraiser finds three comparable rentals with monthly rents of $1,800, $1,950, and $2,100. What conclusion would be most appropriate?
Answer: The subject's market rent falls in the range of $1,800–$2,100 and must be adjusted to subject features
The appraiser adjusts comparable rents for differences in features, location, and condition to bracket the subject's market rent.
Which statement best describes the relationship between cap rates and property value?
Answer: Lower cap rates indicate higher property values
Since Value = NOI ÷ Cap Rate, a lower cap rate results in a higher calculated value for the same NOI.
Operating expense ratios (OER) for residential rental properties in the US typically range from:
Answer: 40% to 60%
Residential rental properties in the US typically have operating expense ratios between 40% and 60% of effective gross income.